Changing Worker Attitudes – Reshape Management Views

Changing Worker Attitudes - Reshape Management Views

Finding it difficult to strike an equilibrium between keeping expenses and turnover to a minimum, companies are changing their functional factories, with the needs of their employees’ comfort and leisure in the forefront of their minds.

The increasing needs of China’s new workers are decreasing the effectiveness of many export goods, especially those that require labor industries like garments bags, footwear, and shoes. Due to rising costs for manufacturing and the break-up of the peg between the yuan and the US dollar, Profit margins for these items are expected to range between 2 to 5 percent.

Hong Kong Small and Medium Enterprises Association Chairman Danny Lau said low costs and low-cost labor, in particular, are among the most significant competitive advantages China has over global factories. While the suppliers have the ability to bargain specifications and agreements with customers to prevent price changes but they could have no other choice than to increase prices if labor-related costs continue to increase. In the event of this, “many buyers will choose to source their products from Vietnam or other countries with low production costs,” Lau said.

To cut costs, businesses are moving out of the Pearl River Delta region. Guangzhou Canttro Extension Electronics (Group) Co. Ltd built factories in Hangzhou, Zhejiang province, and Wuhan, Hubei province. The general manager Zheng Haibin said manufacturing in the cities that are located along the Pearl River Delta is no anymore as efficient and that shifting towards the Yangtze River Delta region could help the company save up to 20 percent in costs for labor.

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“Many businesses within the Pearl River Delta region offer greater-than-minimum salaries, which vary between 1,500 and 2,000 Yuan ($221 up to $295) per month, however employees are not satisfied,” Lau said. Lau stressed that the Chinese workforce is not supposed to compare their earnings to those in advanced countries like the UK which’s hourly rates are around seven pounds ($10.50). Instead, the median amount of 10 Yuan ($1.50) for an hour must be measured against the wages workers earned in the past ten years, which was about 1.25 Yuan ($0.18) per hour.

This belief isn’t shared by circles of manufacturers.

It is worth noting that the Institute for Contemporary Observation director Liu Kaiming did his own research that showed that the majority of industries that employ workers have an average markup of 10 percent. One of the owners he spoke with within Jiangsu province also said that the factory wouldn’t accept orders if the profit potential was lower than 20 percent.

In the event that profit is just two percent Liu says it’s better for the vendor to let a fund manager manage its funds. Savings accounts that are invested in, for instance, can bring in 5 percent of annual earnings.

China Labour Bulletin editor Geoffrey Crothall shares Liu’s conclusions. Crothall believes that the low profit is simply a reason for companies to stop minimum wage wages from growing too quickly.

Liu also dispels the notion that smaller facilities are more prone to risk. He explained that these factories could have higher profits because they have less administrative and maintenance costs and are also subject to tax burdens that are less costly.

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Star Prototype China Ltd managing director Gordon Styles said labor costs generally comprise between 10 and 25 percent of the export price. A typical manufacturing facility located in China, however, could increase efficiency per year by 5 percent.

Concessions to keep the manpower

Although the costs of labor are consuming a significant portion of the margins of manufacturers, Companies are enhancing their working and living conditions in order to reduce the amount of turnover.

A number of foreign-owned companies set an example. At Styles, the production site, the dormitories house just five workers that are less than the typical 8-10 employees. Bedrooms, individual beds desks, computers equipped with an Internet connection, and chairs are available.

Lau from Lau of the Hong Kong Small and Medium Enterprises Association Lau of the Hong Kong Small and Medium Enterprises Association China Center for Labor and Environment project manager David Abrahamson said some companies are creating recreational facilities, like basketball courts. Other companies also hold regularly scheduled barbecues or karaoke nights.

The availability of hot water in bathrooms is not a common occurrence; however, it is a nice feature. There are a few factories that provide this service, and a lot of them restrict availability to just a few hours each day.

Beyond these enhancements, However, Liu believes employers should treat workers with respect and not treat them as machines. Contracts must be honored and wages paid in time, and factories kept safe and tidy.

Additionally, Crothall and Abrahamson think that regular dialogue between staff and management is crucial. It is essential to have a system that allows for constant communication could take place.

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Liu acknowledges that salaries and the living and working conditions are actually getting better in recent times. He estimates that it could be longer than ten years before the wages and working conditions could be at a level comparable to Western standards.

Between increasing the monthly salary and enhancing dormitory and factory setting, companies find it easier to focus on the former. In order to construct a basketball court outdoors like this one, for instance, requires an initial investment of around 100,000 Yuan ($7,380). The process of raising wages will require spending between 10 and 20 percent more for each employee per month.

The styles from Star Prototype said most foreign-owned companies are distributing funds to provide workers with an improved living and working environment. Local businesses, however, aren’t as willing to invest in these measures but are pressured to do so to reduce turnover.

 

 

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